In this FDD Talk post, you’ll learn the following:

• Section I – Background information on the Zoom Room franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Zoom Room franchise, based on Item 7 of the company’s 2021 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Zoom Room franchise, based on Items 5 and 6 of the company’s 2021 FDD

• Section IV – Number of franchised and company-owned Zoom Room outlets at the start of the year and the end of the year for 2018, 2019, and 2020, based on Item 20 of the company’s 2021 FDD

• Section V – Presentation and analysis of Zoom Room’s financial performance representations, based on Item 19 of the company’s 2021 FDD, including information on the:

• 2021 fiscal year average gross revenues, PPP loan (forgiven), cost of goods sold, total payroll, royalties, national advertising fund, software fee, merchant processing fees, office and janitorial supplies, repairs and maintenance, electricity, telephone/Internet, total utilities, local marketing, workers’ comp, liability insurance, total insurance, accounting, rent, total expenses, and net profit for the 6 Zoom Room Franchised Businesses that were open on or before January 1, 2020

• year-over-year and compound annual revenue growth rate from the 2018 fiscal year to the 2021 fiscal year for the 6 Zoom Room Franchised Businesses that were open on or before January 1, 2020

• average, median, high, and low cost to acquire a customer, average revenue per customer (first 8 weeks), historical lifetime revenue per customer, per high value customer (top 25% of customers) and per low value customer (bottom 25% of customers), and customer retention rate for the 8 Zoom Room Franchised Businesses that were open at the start of Zoom Room’s last fiscal year

Section I – Background Information

19 Things You Need to Know About the Zoom Room Franchise

Achieves Record Growth and Quadruples Footprint

1.  In early October 2021, Zoom Room announced its strong growth since the beginning of the pandemic, including the signings of 30 new franchise agreements, quadrupling its footprint within the year. Zoom Room entered 2020 with nine locations in four states and now has 41 units open or in development across 14 states (15 operational and 26 in the process of opening). Zoom Room expected to have 20 units open and 30 in development for a total of 50 locations by January 2022.

2.  Mark Van Wye, CEO of Zoom Room, said, “The pandemic has accelerated the trend of retail flight while increasing the number of entrepreneurs looking to start a new venture. The pet sector has always fared well even during the most economically-challenged times; the recent boom in dog ownership is no exception. We credit our extreme growth curve to astute investors responding well to Zoom Room’s ability to serve the needs of dog owners with a demonstrably profitable business model, thus meriting our brick-and-mortar place in communities across the country.”

3.  PetPoint, a software program utilized by some 1,200 shelters nationwide, shared that within the past year, pet adoption rates have increased 700%, and Americans were expected to spend a record $100B on their pets in 2021.

4.  Despite the economic uncertainty during the global pandemic, Zoom Room was well-positioned and prepared with their safety protocols in place as the demand for dog training remained high. Zoom Room built a sense of community and transformed dog training into an infinitely repeatable affair with its mission of positive reinforcement methods, emphasizing socialization while focusing on the relationship between dog and owner.

5.  According to Anthony Polazzi, president of AP Franchised Concepts, the venture capital firm backing Zoom Room, “Zoom Room has seen a tremendous growth in sales with an increase of 99% in same-store sales compared to the prior year. We’re excited to support Zoom Room in expanding into multiple markets where the pet industry is booming. Zoom Room has one of the strongest and healthiest profit margins and is truly a company to watch within the franchise industry.”

6.  Zoom Room offers genuine 360° support to its franchisees, beginning with a dedicated real estate team to identify a site with optimal demographics and assistance navigating business formation and financing. Offering retail zoning and requiring only 2,700 sq. ft., Zoom Room is replicable, scalable, and feasible for any city or suburb.

7.  With an unusually low startup cost in the pet space, the franchise brand includes easy build-out and low payroll costs with staffing needs limited to only two people at a given time. The company also provides meticulous training as well as state-of-the-art marketing support for its franchisees.

8.  The unparalleled framework and support the Zoom Room franchise system provides won over five-unit franchise developers Ken and Cindy Mizell, who own and operate locations in North Dallas. “We fell in love with Zoom Room’s unique concept, whose sole purpose is to build and foster the bond between pet parent and dog through classes that emphasize socialization, positive reinforcement, and education. We immediately recognized the profitable business model that could be attained through Zoom Room’s small retail footprint requirements, low payroll costs, and economies of scale that being part of a franchise system offers.”

9.  James Gies, franchise owner of a Zoom Room near Orlando, made the decision to invest in his own Zoom Room training center after years of experience in overseeing a chain of boutique dog services. “The thriving pet industry provides a substantial opportunity to build a profitable and sustainable business getting to do what brings joy to my life while making an impact in the community. As new dog ownership continues to rise and pet adoptions continue to soar, I plan to capitalize on the success of my Winter Park location and expand with two additional Zoom Room locations.”

10.  After reading about the meteoric rise in the pet food industry and the projected correlated growth of the whole pet industry over the next 10 years, corporate marketers Mark and Kate Scholz decided to match their family’s commitment to the community and their love for dogs with the potential for immediate profitability. “We knew Zoom Room was the right franchising choice for us and signed up for three units, and are already thinking about adding two more. Our locations are in Austin, Texas and we just love our dogs here! At Zoom Room, we can add to the community by providing a safe and authentic space for dogs and their owners to socialize, learn and be active.”

Experienced Massive Growth in 2020 Despite Ongoing COVID-19 Pandemic

11.  In mid-February 2021, Zoom Room announced record growth with 15 franchise signings and the opening of three new locations in 2020. Nearly tripling Zoom Room’s national presence, the expansion is led by a five-unit deal in Dallas, TX and a three-unit deal in Austin, TX, delivering the company’s first multi-unit agreements. The news was jointly announced by Mark Van Wye, CEO of Zoom Room, and Anthony Polazzi, president and CEO of AP Franchised Concepts, who also reported the overall success of existing stores as they each experienced a double-digit increase in sales in spite of 2020’s impact on most industries.

12.  CEO Mark Van Wye said, “The pandemic has caused many industries to not only fight to sustain themselves, but to survive. The pet industry, on the other hand, is thriving as dog adoption rates have seen a 700 percent increase, allowing Zoom Room to continue providing exceptional and much needed dog training and socialization. In doing so, franchises have continued to experience double digit year-over-year growth in revenue with socially-distanced classes, especially for puppy training, which are in higher demand than ever before.”

13.  Zoom Room’s key revenue streams and services include group dog training classes, private training, playgroups, and retail sales. Showcasing passionate client loyalty, it registers an 87 percent retention rate and a Net Promoter Score (NPS) score of 90, contributing to lifetime spending of almost 50 times the cost to acquire and net profits in the six figures for franchisees.

14.  Emphasizing continued consumer demand amid the pandemic, the company’s book, Puppy Training in 7 Easy Steps, became America’s #1 bestselling book on dog training for more than five months and has maintained its position on the bestseller list since its release in April 2019. The company also authored Ultimate Puppy Training for Kids, a guide for young readers, which was published in mid-2020 during the surge in puppy ownership.

15.  Focused on positive reinforcement methods, Zoom Room emphasizes human involvement, turning dog training into an infinitely repeatable activity. Classes include puppy, obedience, and agility training, as well as non-traditional enrichment classes, such as Pup-lates, urban herding, scent workshops, therapy dog training, and interactive playgroups. Zoom Room locations also offer a full line of hand-picked, eco-friendly, solution-oriented pet training products, sourced domestically and from countries with ethical production standards.

Company History

16.  Zoom Room, which is based out of Culver City, California, was founded in 2007. The company takes a unique approach to dog training, focusing on training with dog owners and also giving the animals a place to exercise and socialize. Zoom Room locations are indoor dog gyms that also serve as event spaces for birthday parties and Doggy Disco fundraisers for rescue organizations.

17.  According to Zoom Room CEO Mark Van Wye, Zoom Room was created because there was no indoor space for owners to train with their dogs. Additionally, Zoom Room wanted to provide quality dog training that wasn’t the traditional obedience training.

18.  Zoom Room began franchising in 2009. Growth was slow during the company’s first decade as a franchise, but has picked up since the start of the COVID-19 pandemic. Zoom Room sells its own line of retail products, which now account for as much as 40% of gross revenue at its stores. The company is currently seeking franchisees in all states, except for Hawaii, North Dakota, and South Dakota.

Entrepreneur’s Franchise 500

19.  Zoom Room did not rank on Entrepreneur’s 2022 Franchise 500 list.

Section II – Estimated Costs

• Detailed estimates of Zoom Room franchise costs, based on Item 7 of the company’s 2021 FDD.

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

• Detailed information on Zoom Room’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2021 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2018

• Outlets at the Start of the Year:  6
• Outlets at the End of the Year:  6
• Net Change:  0

2019

• Outlets at the Start of the Year:  6
• Outlets at the End of the Year:  8
• Net Change:  +2

2020

• Outlets at the Start of the Year:  8
• Outlets at the End of the Year:  11
• Net Change:  +3

Company-Owned

2018

• Outlets at the Start of the Year:  3
• Outlets at the End of the Year:  3
• Net Change:  0

2019

• Outlets at the Start of the Year:  3
• Outlets at the End of the Year:  3
• Net Change:  0

2020

• Outlets at the Start of the Year:  3
• Outlets at the End of the Year:  3
• Net Change:  0

Section V – Financial Performance Representations (Item 19, 2021 FDD) and Analysis

• The information in this Item 19 includes certain historical financial information provided by all Zoom Room Franchised Businesses that were open and operating as of September 1, 2020.

Part 1 – Dog Training Gym Financial Performance Analysis for Operating Franchisees for Franchised Locations Opened on or Before January 1, 2020

• The reporting period for Part 1 is from September 1, 2020 through August 31, 2021.

• Part 1 includes all six franchisees that were opened on or before January 1, 2020. These locations include Austin, Texas; Huntington Beach, California; Seattle, Washington; Sherman Oaks, California; Trophy Club, Texas; and Virginia Beach, Virginia (for the purposes of this Part 1, the “Operating Franchisees”).

Average

Gross Revenues:  $644,062 (97.2%)

PPP Loan Forgiven:  $18,418 (2.8%)

Total Gross Revenues (including PPP Loan Forgiven):  $662,480 (100.0%)

Expenses

• Cost of Goods Sold:  $55,226 (8.3%)
• Total Payroll:  $115,696 (17.5%)
• Royalties:  $50,959 (7.7%)
• National Advertising Fund:  $6,370 (1.0%)
• Software Fee:  $5,076 (0.8%)
• Merchant Processing Fees:  $14,880 (2.2%)
• Office and Janitorial Supplies:  $9,208 (1.4%)
• Repairs and Maintenance:  $1,487 (0.2%)
• Total Utilities (Electricity and Telephone/Internet):  $8,526 (1.3%)
• Local Marketing:  $25,422 (3.8%)
• Total Insurance (Workers’ Comp and Liability Insurance):  $4,489 (0.7%)
• Accounting:  $5,152 (0.8%)
• Rent:  $86,809 (13.1%)
• Total Expenses:  $389,299 (58.8%)

Net Profit:  $273,181 (41.2%)

• The term “Gross Revenues” means the total of all revenues and income from the sale of all Zoom Room Franchised Business products and services to customers of each location. Gross Revenues does not include the sale of gift cards sold for use at the Zoom Room Franchised Business, PPP loan funds, or sales tax or any comps. The information regarding Gross Revenues has been provided to Zoom Room by each of the six Operating Franchisees and has not been audited.

• “Payroll” excludes salaries paid to the owner(s) of the Franchised Locations.

• The term “Net Profit” was calculated by subtracting the value of the Total Expenses from the Gross Revenues of each location.

• In the time period between March 2020 and May 2020, some of the six Operating Franchisees were temporarily closed for some period of time pursuant to a government-mandated order triggered by the coronavirus, but incurred additional expenses including, but not limited to, payroll, rent, etc. that they otherwise would not have incurred because of the conditions under which they received the loan funds from the PPP program (“PPP Incurred Expenses”).

• The chart above treats PPP loans funds received as revenue once the government forgives the PPP loans in order to offset the PPP Incurred Expenses. The forgiven amounts from the PPP loan funds disbursed to the six Operating Franchisees are listed as revenue as an offset to the PPP Incurred Expenses.

Part 2 – Year-Over-Year Revenue Growth for 2018 to 2021 for Operating Franchisee Locations

• The reporting period for Operating Franchisees in Part 2 is September 1, 2017 through August 31, 2021. Specifically, the information contained in Part 2 is based upon Gross Revenues earned by the franchisees during the 12-month period (“Annual Revenue Period”) for the time periods of September 1, 2017 to August 31, 2018 (“2018 FY”); September 1, 2018  to August 31, 2019 (“2019 FY”); September 1, 2019 to August 31, 2020 (“2020 FY”); and September 1, 2020 to August 31, 2021 (“2021 FY”) (each a “Reporting Fiscal Year”).

Franchised Locations Average

• 2021 FY vs. 2020 FY:  59%
• 2021 FY vs. 2019 FY:  53%
• 2021 FY vs. 2018 FY:  83%
• Compound Annual Growth Rate:  21%

Pet Industry Average

• 2021 FY vs. 2020 FY:  6%
• 2021 FY vs. 2019 FY:  13%
• 2021 FY vs. 2018 FY:  22%
• Compound Annual Growth Rate:  7%

• The information in this Part 2 includes certain historical financial information provided by a total of six Zoom Room Franchised Businesses that were open on or before January 1, 2020 (for the purposes of this Part 2, the “Operating Franchisees”).

• The Operating Franchisees include the Dog Training Gyms operated by franchisees in Huntington Beach, California; Sherman Oaks, California; Austin, Texas; Trophy Club, Texas; Virginia Beach, Virginia; and Seattle, Washington.

• The term “CAGR” means compound annual growth rate. CAGR is typically used to evaluate the annual rate of growth over multiple years. It determines the rate necessary to grow from a beginning balance to an ending balance assuming the balance compounds one time per year. In this case, it is used to compare the compound annual growth rate of sales over a three-year period. CAGR does not reflect investment risk.

• The data for “Pet Industry Expenditures” is based on the gross sales or revenues of the pet industry as a whole as reported by the American Pet Products Association (“APPA”). As noted by the APPA, the 2021 figure used for the comparisons with other years is an estimate, whereas figures for all other years reported by the APPA are actual. These figures are based on calendar years.

Part 3 – Customer Acquisition and Long-Term Revenue Data for Operating Franchisees

• The reporting period for Part 3 is set out in the applicable notes for Part 3.

Cost to Acquire a Customer

• Average:  $22.48
• Median:  $22.11
• High:  $42.86
• Low:  $5.01

Average Revenue Per Customer (First Eight Weeks)

• Average:  $377
• Median:  $367
• High:  $507
• Low:  $311

Historical Lifetime Revenue Per Customer

• Average:  $1,824
• Median:  $1,585
• High:  $2,829
• Low:  $1,417

Historical Lifetime Revenue Per High Value Customer (Top 25% of Customers)

• Average:  $4,705
• Median:  $3,758
• High:  $7,554
• Low:  $3,648

Historical Lifetime Revenue Per Low Value Customer (Bottom 25% of Customers)

• Average:  $377
• Median:  $376
• High:  $492
• Low:  $269

Customer Retention Rate

• Average:  84%
• Median:  84%
• High:  91%
• Low:  79%

• The “Cost to Acquire a Customer” was calculated based on new clients acquired between September 1, 2020 and August 31, 2021, and the amounts spent on advertising during the period of August 1, 2020 and July 31, 2021, as reported by the eight franchisees open at the start of  Zoom Room’s last fiscal year (for the purposes of this Part 3, the “Operating Franchisees”).

• The “Average Revenue per Customer (First Eight Weeks)” was determined by examining training customers’ purchases during their first eight weeks as training customers, which initial eight-week period began on the date of their first visit, looking at the period between January 1, 2020 and December 31, 2020 as reported by the eight Operating Franchisees.

• The “Historical Lifetime Revenue per Customer” was determined by examining training customers who received services from September 1, 2018 through August 31, 2019 (“Analyzed Customers”) and analyzing the revenue from those Analyzed Customers during the period between September 1, 2016 to August 31, 2020.

• It was calculated by taking the cumulative amount spent by the Analyzed Customers at each of the six Operating Franchisees that were open on or before January 1, 2020 (Huntington Beach, California; Sherman Oaks, California; Seattle, Washington; Austin, Texas; Trophy Club, Texas; and Virginia Beach, Virginia), which includes the amounts spent by Analyzed Customers who only made a single purchase during that period and Analyzed Customers who made multiple purchases during that period, and dividing that sum by the total number of Analyzed Customers examined for each of the six applicable Operating Franchisees.

• The term “High Value Customer” means an Analyzed Customer whose total purchases put that Analyzed Customer in the top 25% of Analyzed Customers at a particular Dog Training Gym.

• The term “Low Value Customer” means an Analyzed Customer whose total purchases put that Analyzed Customer in the bottom 25% of Analyzed Customers at a particular Dog Training Gym.

• The “Customer Retention Rate” was determined by examining customers who purchased training services for the first time between September 1, 2019 and August 31, 2020. Zoom Room looked at whether they made a subsequent purchase, during the period between September 1, 2019 and August 31, 2021.

• In order to constitute a subsequent purchase, and therefore be used to indicate retention, a customer must have made two or more purchases over multiple days during this time period (“Retained Customers”).

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